"I was sitting at my desk and I jokingly said to him, you know, 'Ha ha, have you ever received any bags of cash?'" Liberal Party staff member Nicholas Jones recalled at a corruption inquiry.
In a stint in the Independent Commission Against Corruption witness box, Mr Jones, the senior electorate officer to suspended Liberal MP Garry Edwards, said his boss had told him last month he received "an envelope" from property developer Jeff McCloy.
But neither reported the gift to the ICAC, which was inquiring into illegal political donations given to Liberal candidates before the March 2011 state election.
Mr Jones told the inquiry on Monday Mr Edwards, the member for the Hunter Valley seat of Swansea, had responded to his jocular question by saying: "It's the Swansea campaign, who would give us money?"
But he added Mr Edwards had "then carried on to say I did receive an envelope [from Mr McCloy] to go to a raffle".
It is illegal for property developers to make political donations in NSW under laws passed in 2009.
Mr Jones said Mr Edwards had told him he had "never opened" the envelope and had simply passed it on to Max Newton, who was then the Liberals' branch president.
The ICAC has heard evidence Mr Edwards and Mr Jones plotted to conceal the donation from the ICAC because Mr Newton had since died.
John Macgowan, a senior adviser in the Baird government, gave surprise evidence last week that Mr Edwards told him last month that Mr McCloy had given him an envelope of cash but it contained "far less than the $10,000" former Liberal MPs Tim Owen and Andrew Cornwell had received.
Mr Macgowan said the admission was made on August 12, the same day Mr Owen had been caught lying to the ICAC about $10,000 in cash given to him by Mr McCloy.
He said he advised the men to come clean to the ICAC but Mr Jones had told him there was no need to reveal the donation because Mr Newton, the only witness, was "deceased and couldn't dispute ... our version of events".
"I completely refute that," Mr Jones said, adding Mr Macgowan had "never" told them to report the matter to the ICAC.
He accused Mr Macgowan of lying in his evidence because he wanted to improve his chances of winning Liberal Party preselection for an upper house seat by distancing himself from his former boss.
Mr Macgowan was previously an adviser to former police minister Mike Gallacher, who is also under investigation by the ICAC.
"I believe he needs an avenue to clear his name and I wasn't at all surprised when these comments were made," Mr Jones said.
Commissioner Megan Latham asked: "How could that possibly assist Mr Macgowan?
"He rats out people in the Liberal Party ... and that makes him a more attractive candidate for the upper house? Interesting tactic."
Asked why he didn't tell the ICAC about the envelope, Mr Jones said: "Call me incredibly naive, but I knew that Garry had been summonsed to ICAC and I thought that was the correct and appropriate vehicle for him to report that."
